Strode v. Commonwealth
52 Pa. 181
Pa.
1866
Check Treatment

Error to the Court of Common Pleas of Chester county.

Joseph was qualified, and assumed the executorship.

There was appraised, as subject to collateral inheritance tax, the following personal estate, viz.:

United States five-twenty bonds, authorized by Act of Congress, of February 25th 1862, amounting to . . . $3150.00

Premium on same at 10 per cent. . . . 315.00

The whole amount of collateral appraisement on the bonds was $3465.

The said executor, in settlement of the balances due the residuary legatees, transferred to them specifically the said United States bonds at the sum at which they were appraised.

*182If they are so subject, the judgment to be given in favour of the Commonwealth for the sum of $173.25, with costs.

If they are not so subject, then judgment for the defendant with costs.

The court below (Butler, P. J.) gave judgment for the Commonwealth for $173.25, delivering the following opinion:—

“ In McCulloch v. Maryland, 4 Wheat. 316, the Supreme Court of the United States declared that the several states ‘ have no power by taxation or otherwise, to retard, impede, burthen or in any way control the operations of the constitutional laws enacted by Congress to carry into execution the powers vested in the general government.’ And this principle is affirmed by the cases of Weston v. The City of Charleston, 2 Peters 449; Osborne v. The Bank of the United States, 9 Wheat. 738; Dobbin v. The Commissioners of Erie county, 16 Peters 435; Bank of Commerce v. The Commissioners, 2 Black 620; and the Bank Tax cases in 2 Wallace 200.

“ And it was, therefore, decided that the states cannot impose taxes on the banks formerly established under the laws of the general government, nor on the offices held by the government’s agents. It would seem to be clear, therefore, independently of the prohibition contained in the statutes authorizing the recent loans, that the states cannot tax the bonds issued by the general government.

“ In the case before us it is urged that what is claimed by the plaintiff is not a tax. But if this were determined to be so, it would not seem to advance us in the inquiry which the case presents. If not a ‘ tax’ it certainly is a burthen, and if imposed on the bonds of the United States, or on the owner of such bonds, in respect to them, it would be obnoxious to the objection which the defendant makes. But is it imposed on the bonds or on an owner of them ? What is called a ‘ collateral inheritance tax,’ is a bonus, exacted from the collateral kindred and others, as the condition on which they may be admitted to take the estate left, by a deceased relative or testator. The estate does not belong to them, except as a right to it is conferred by the state. Independently of government no such right could exist. The death of the owner of property would necessarily terminate his control over it, and it would pass to the first who might obtain possession. The right of the owner to transfer it to another after death, or of kindred to succeed, is the result of municipal regulation, and must, consequently, be enjoyed subject to such conditions as the state sees fit to impose. See Black. Com. 2d book, pp. 10, 11, 12, 13. And we see the state continually imposing new conditions ; sometimes enlarging, at others restraining, the privilege, and sometimes again entirely taking it away, by changing the parties who are to succeed. In Pennsylvania up to 1833 we *183followed the rule of the common law in ascertaining the ‘ next of kin.’ Since that time we have pursued the rule of the civil law, which by employing a different mode of computation frequently confers the estate on an entirely different class of kindred. Up to 1855, if an intestate left brothers and sisters entitled to inherit, and also the grandchildren of a deceased brother or sister (their immediate parent also being dead), the brothers and sisters took the entire estate. Since that time they are required to share it with the grandchildren. Up to the same period when nephews and nieces, the children of several brothers and sisters, alone were entitled to inherit, they shared the estate equally. Since that time they take per stirpes, so that if there be six, one of them representing one deceased brother, and the other five another, this one now takes as much as the other five. These instances are sufficient for illustration ; they might be almost indefinitely multiplied. They show how constantly the state asserts its right to control the disposition of decedents’ estates. And it does so whether there be a will or not. If the decedent leaves a wife, the state gives her more than one-third of his personalty and a share of his realty, though he may have willed otherwise. Blackstone in speaking of this subject says: ‘ Nothing varies more than the right of inheritance and testament, under the different national establishments. In England particularly is thjs diversity carried to such a length as if it had been meant to point out the power of the law in regulating the succession to property, and how futile every claim must be that has not its foundation in the positive rules of the state. For instance, in personalty the father may succeed to his children ; in landed property he never can be their heir by the remotest possibility. In general only the oldest son, in some places only the youngest, in others all the sons together, have a right to succeed to the inheritance. In realty males are preferred to females, and the eldest male will usually exclude the rest, while in the disposition of the personalty females are admitted with the males, and no right of primogeniture is allowed.’

“ I repeat, therefore, as the right to take by succession and testament is derived from the state, it must necessarily be enjoyed subject to such conditions as the state may impose. And if a condition be that the kindred or legatees shall pay a bonus, this is not a tax or burthen imposed on their property, or on the property of anybody else. It is simply the price of the privilege which the state has conferred upon them. If they do not choose to avail themselves of the privilege they need not pay the price, and are no worse off than before.

“ I have thus far treated the question as if the distribution was to be of the bonds. But in the case before us, as in all cases of general legacies and intestacy, this is not so. The law contem*184plates the reduction of the estate to money. It is as for money the administrator accounts, and it is only for money he can be compelled to account for distribution. The distributees cannot be required to accept anything else. If the estate consist of ordinary bonds, they are collected; if of public bonds, they are sold in the market like other chattels of the deceased. Frequently, it is true, by an arrangement with the distributees, bonds and other securities are transferred to them in the stead of money, and equity might interfere to prevent a sale of such securities where the distributees offer to take them, and a sale is unnecessary. But in such cases the distributees take from the administrator or executor, as any other transferree would, and must be regarded as purchasers. They agree to accept the bonds instead of the money to which they are entitled. It is in effect an investment of their shares in these securities.

The court entered judgment for the plaintiff according to the case stated; which was the error assigned.

The states cannot tax the means by which Congress is authorized to put into execution its enumerated powers: McCulloch v. Maryland, 4 Wheat. 316; Osborn v. Bank of United States, 9 Wheat. 738; Weston v. Charleston, 2 Peters 467; Dobbins v. Erie, 16 Id. 448. Whether applied directly to government stock: Bank of Commerce v. New York City, 2 Black 620, Id. 635 note ; or the capital of banks composed of United States stocks: Bank Tax Cases, 2 Wallace 200.

The state, in return for the taxation she imposes on her citizens holding ordinary bonds, provides remedies for the collection; but she can afford no such remedy against the United States. The suppol’t to the state by the citizen, and the protection of the citizen by the state, are reciprocal duties. How can these stocks be taxed on the principles referred to ? They do not exist, nor are they introduced into the state, by its authority, but by the paramount authority of the United States. To allow these bonds to be taxed would allow a state to nullify the Acts of Congress. It would make congressional legislation unequal, for Pennsylvania might tax and Delaware might not.

The court below admitted these principles, but denied their application to this case.